Monday, June 6, 2011

Shadow Stats debunked, part II

The Shadow Stats cultists who believe the U.S. Bureau of Labor Statistics is manipulating the inflation numbers have more evidence against them. MIT's Billion Prices Project collects prices completely independently of the BLS, yet it comes up with essentially the same U.S. inflation rate. This graph shows less than a percentage difference after almost three years:

While the Federal Reserve is unlikely to panic just yet, Mr Varian said that the GPI shows a “very clear deflationary trend” for web-traded goods in the US since Christmas. ...

Mr Varian emphasized that the GPI is not a direct replacement for the CPI because the mix of goods that are sold on the web is different to the mix in the wider economy. Housing accounts for about 40 percent of the US CPI, for example, but only 18 percent of the GPI.

The GPI shows a “pretty good correlation” with the CPI for goods such as cameras and watches that are often sold on the web, but less so for others, such as car parts, that are infrequently traded online.

So, the Billion Prices Project is largely in agreement with the CPI—varying by only a fraction of a percent per year—while Google reports even lower inflation numbers than the BLS.

Now ask yourself, which is more likely?

Three very different institutions—the BLS, MIT, and Google—are all conspiring to mislead the public

One guy—John Williams—is making a living by taking advantage of suckers

I'll give you a hint. Many Shadow Stats followers think the CPI doesn't count food and energy, even though it does. (It's a different measure, core CPI, that ignores food and energy.) Ignorant people are easily scammed.